ABC predicts modest growth for 2017 nonresidential construction sector; warns of vulnerability for contractor

Associated Builders and Contractors (ABC) forecasts a slowdown of growth in the U.S. commercial and industrial construction industries in 2017. While contractors are vulnerable to rising commodity prices and potential interest rate increases in 2017, the middling consumer-led recovery should still lead to modest growth in construction spending and employment.

“The U.S. economy continues to expand amid a weak global economy and, despite risks to the construction industry, nonresidential spending should expand 3.5 percent in 2017,” says ABC Chief Economist Anirban Basu in a press release. “For more than two years, the Federal Reserve has been able to focus heavily on stimulating economic growth and moving the nation toward full employment. However, as commodity prices, including energy prices, firm up and labor costs march higher, the Federal Reserve will need to be more concerned about rising inflation expectations going forward.

“Contractors also should be prepared for increases in commodity prices, which could translate into further stagnation in construction spending volumes if the purchasers of construction services are not prepared for related cost increases,” warns Basu.

However, the average age of all fixed assets, including structures like factories and hospitals, currently stands at 23 years, which is the oldest on record dating back to 1925. Most enterprises realize they will need to replace a lot of their capital stock in the near future, meaning there is a bullish scenario that could take place.

Basu’s full forecast is available in the December issue of ABC’s Construction Executive magazine, along with the regional outlook for commercial and industrial construction by Dr. Bernard Markstein, president and chief economist of Markstein Advisors, who conducts state-level economic analysis for ABC.